21.5% growth in direct tax revenue for FY22 a realistic goal: CBDT chairman

In a Q&A, P C Mody says while income tax slabs have been left untouched, more money is being put in the hands of taxpayers with faster refunds. Tax administration reforms will boost tax compliance

Central board of direct taxes (CBDT) chairman P C Mody exuded confidence about achieving a 21.5 per cent growth in direct tax revenue in 2021-22 on the back of increased use of technology and data analytics by the department. He tells Dilasha Seth & Indivjal Dhasmana that although income tax slabs have been left untouched, more money is being put in the hands of taxpayers by way of faster refunds. Besides, the tax administration reforms will provide an enabling environment to increase tax compliance. Excerpts: 

There are varied interpretations being given to the budget proposal to amend "liable to tax" provisions. What was the intent behind the proposal and who all will be affected?

The concept of "liable to tax" is particularly relevant to non-residents. If the person is supposed to file his tax returns, but because of any subsequent provisions in the tax treaties he is exempt from filing the tax returns, it does not mean that he is not liable to tax. If my income goes above a threshold, I have to pay tax. Subsequently I may get tax exemption due to provisions in tax treaties. We are saying the person is liable to tax but he has been exempt now. The amendment is clarificatory in nature. Words used in tax treaties is "liable to tax."

What was the idea behind taxing provident fund, which is essentially a safety net for individuals?

We have not touched the majority of the taxpayers. Up to Rs 2.5 lakh is exempt. What is the percentage of taxpaying population falling in this bracket? Very miniscule. 

Despite being realistic about the revenue collection target for the current fiscal, a 21.5 per cent growth in direct tax mop up in FY22 seems a little ambitious. What is your take?

On the contrary, I think now, the projections which have been made are far more realistic than they ever were. That is to say, we are not being overly ambitious. As for the current fiscal, which has been so exceptional, there was a case for the target being where it has been fixed. Next year is not going to be the same and the economic activity is likely to grow at a faster pace. Plus, with increasing use of technology, data analytics, changing the compliance behavior of the taxpayer, all put together in a synergized manner will definitely lead to better collections.

What is the direct tax collection so far as on February 1?

As of now, the collection is somewhere around Rs 6.64 trillion and we need to achieve a target of Rs 9.04 trillion. It will not be very difficult as the last quarter contributes a substantial chunk of your overall collection target. So, put together I think, I'm reasonably confident that we will achieve it.

Personal income tax collection target estimated for FY21 and FY22 is higher than the corporation tax collection. Can we attribute this only to the corporation tax reduction?

Absolutely. The corporation tax rates have been slashed substantially, which has impacted collections. But, we will get compensated by way of higher economic activity over a period of time.

There was no reduction in direct taxes as widely expected. What was the thought process behind that, especially when increasing disposal income is key to revive economic demand?

The whole point is leaving more money in the hands of taxpayers. First and foremost, whatever was due to them should be refunded to them. That’s what we have done during the pandemic. We have issued seven per cent more refunds compared to the previous year. Besides, the slab rationalization done in the previous budget also left more money in the hands of individual taxpayers. So, the thought process in this budget was that it was more important to have a tax administration which gives a proper enabling environment. That is what we are focusing on.

The participation rate in Vivad se Vishwas Scheme, which has been further extended to February 28, has been dismal. How much does CBDT expect to garner from VsV?

So far, we have received something 1,18,000 forms to settle 1,32,000 of worth of disputes, which is almost 23 24 per cent of the total disputes. The tax amount is something to the tune of Rs 95,000 crores.

But, this indicates that only small cases participated under VsV and the large tax disputes stayed away?

We have tried to give them this opportunity to settle the dispute. That is up to the taxpayer and the fact that many people have joined the scheme is a sufficient testimony to the fact that they were also keen to resolve the disputes. And this also needs to be seen in the context of what earlier such schemes did? What was the contribution there or what was this the dispute which was settled? So, compared to that, it is a stupendous success.

In the next stage, ITAT will also go faceless. But industry does not seem to be very happy with that? How would you address their concerns?

After faceless assessment, we had appeals and penalty. That has worked well, so what is the dispute with ITAT going faceless? It is just an extension of the appellate process. If the initial stage can be made faceless, then why not the later stages? On the contrary, it will bring in more transparency, more uniformity and a total randomized allocation. Issues will get decided purely on merit which is a big service to the taxpayer. So, ultimately, this process is leading to what it is a better service to the taxpayer.

How has the response to faceless appeals been? What do the numbers look like?

More than 400,000 appeals are pending at the appellate stage with the commissioner appeals. Since we have just started the Scheme, we have been able to pass about 2000 orders.

What is the broad idea behind replacing the Authority of Advance Ruling (AAR) with Board of Advance Ruling? How many cases are pending at the AAR?

The AAR due to various reasons did not have the required manpower available to them consequent to which a lot of applications were pending. Roughly about 700 AAR applications are pending. So Board will ensure faster disposal, otherwise it defeats the very purpose for which it has been formed. Since there will be departmental officers in the Board, we are at least sure of getting the manpower. 

While doubling TDS for non-filers with a TDS liability of at least Rs 50000 has been introduced. Will it not put administrative burden on the collectors or the deductors?

The simple logic behind this is that a person who's TDS liability is up to Rs 50,000 or more would ideally be filing his return. Logically, it does not make sense that he should be a no-filer. With the help of technology, I think that the data is very decipherable. So it's basically a disincentive for a person who's not filing the return of income. At least a leakage has been plugged.